City, developer go forward on condos downtown

Tuesday

Feb 25, 2014 at 5:51 PM

Former Sprint site would feature 18 upscale condominiums

By Susan Latham CarrStaff writer

The city of Ocala will enter into formal negotiations with local developer Sandy McBride — including the city providing roughly $1.026 million in incentives — to transform the former Sprint building downtown into 18 upscale condominiums.

"These units are going to be very nice," McBride told council members at a workshop Tuesday. "It's going to be first class."

He estimated the 1,100-square-foot units — six on each floor — would sell for about $200,000 each. He also said there may be some retail space on the first floor.

The council also listened to an update from Bryce Peek, another local developer, regarding Ocala Development's efforts to analyze the feasibility of building a hotel on the former Chamber of Commerce site downtown. Peek said his firm has applied for a Hilton hotel franchise. Peek likely will be asking for an extension of time in the near future to further explore the feasibility of developing the hotel.

The focus of Tuesday's agenda, however, was McBride's request.

McBride has estimated the cost of his condominium project is $3.7 million, but for him to make a profit, the most he would invest is $2.7 million. He is requesting the city pick up the balance in the form of utility, building and site work, as well as fee waivers and a refund of city tax increment dollars for about 20 years.

McBride is seeking a $266,000 tax increment rebate. The tax increment is the increase in property taxes that arises when property values improve as a result of the project. The tax increment would be based on increased property values, not on existing revenues. And they would only be rebated if the project is completed. McBride would receive the city's tax increment funds on the increased value until the $266,000 is paid.

McBride also would like $44,000 in fee waivers.

As far as utility work, the estimated city incentive of $208,000 includes bringing electric, water and sewer utilities to the building, as well as an electric transformer and water and sewer meters and the related site work.

The $247,000 being requested for building work includes $68,000 for asbestos removal, an elevator that costs $121,000 and a roof that costs $58,000.

The $261,000 incentive for site work includes parking lot construction and paving, landscaping, irrigation and streetscapes.

The city could use its own staff to do any or all of the utility, building or site work, or it could hire its own contractor or pay the developer's contractor to do the work.

"Some of these costs are costs the city is going to have regardless of whether we do a project with Sandy or not," said Marc Mondell, the city's executive director of community development.

For instance, the city would incur costs to tear down the building and would have to pay for the asbestos removal. And he said some of the improvements the city would make would benefit the entire block, not just McBride's project. He said there is money available in the Tax Increment Financing Fund to pay for some of the incentives.

Mondell told the council the numbers that were presented are estimates. He said if there are additional costs, they will be the developer's responsibility.

As far as the city potentially waiving fees goes, Mondell said those are dollars the city would not receive if there were not a project. And the tax rebate would not come out of the city's current coffers, but rather they'd be dollars the city simply would not receive. The city currently is not receiving any taxes on the property.

He said there is precedent for the city paying for reroofing and parking. When the city swapped buildings with the Chamber, it put a new roof on the building given to the Chamber. And the city has bought land for parking for Ansafone.

The city owns the Sprint property but will not give McBride title to the land until he has invested $1 million in the project.

McBride said his total $2.7 million investment does not include the $75,000 he already has spent doing the feasibility study. His vision for the project includes curtain walls, balconies and exterior work. Curtain walls separate the exterior from the interior and typically are made of glass. He said the building would be "completely gutted." There would be 14-foot ceilings with concrete walls and ceilings.

Councilwoman Mary Rich asked if there was any possibility of having a claw back provision that would return the title on the property to the city in the event McBride failed to complete the project.

Assistant City Attorney W. James Gooding III, who said he has represented McBride in other issues, said if McBride defaulted before he spent $1 million, the city would still own the land. He said if McBride defaulted after he spent $1 million and had received the title, his lender likely would either finish the building or sell it to someone who would finish it.

"It's up to you to decide if it's too much risk for you to take," Gooding told Rich.

It appears likely McBride would need the deed to the property to secure the funding necessary to complete the rest of the project.

Council members seemed comfortable with the incentives.

"I would like to see us proceed," Council Chairman John McLeod said.

Councilmen James Hilty and Brent Malever concurred.

Councilman Jay Musleh said he would not be voting on the project because McBride sits on the board of Gateway Bank of Central Florida, where Musleh is a senior vice president, which would be a conflict of interest. But Musleh said Gooding has told him he still can speak on the issue.

"We have a local developer willing to put $1 million of his own money in the project," Musleh said.

He said the city's goal is to get residential development into the downtown.